“[W]hy,” asks Krugman, “would you insist on privatizing a health program that is already public, and that does a much better job than the private sector of controlling costs? The answer is pretty obvious: the flip side of higher taxpayer costs is higher medical-industry profits. … As long as the spending ends up lining the right pockets, and the undeserving beneficiaries of public largess are politically connected corporations, conservatives with actual power seem to like Big Government just fine.”

At issue: In the ramp-up to “ObamaCare,” several Republican governors announced they would reject attendant expansions of Medicaid, a government-run health plan for the poor, in their states. Now some of them — in particular, Governor Rick Scott of Florida — are changing their tune, so long as the program is administered through the offices of “private” insurance companies.

Krugman has it exactly right: The point of “privatizing” Medicaid isn’t to cut costs, it’s to funnel money from taxpayers’ pockets into the bank accounts of powerful, privileged, politically connected companies.

Where Krugman goes off the rails is in conflating the politically defined American “private sector” with free markets. Modern American capitalism, especially in the area of health care, is largely an exercise in half-baked socialism. The half that’s baked is the risks, which are socialized. The profits, well, not so much.

While most industries benefit from state privilege to one degree or another, health care companies in particular are the equivalent of mafia “made men.” They’re untouchable. They get anything they want from the government, from licensing rackets and medical school quotas to depress the supply of doctors, to state-granted monopolies not just on the production of particular medicines but on the definitions of medicine itself (can it be grown on your window sill? — not medicine, and if we see it you’re going to jail) to protection from lawsuits by customers who don’t get what they pay for (Republican President Richard M. Nixon and Democratic Senator Edward M. Kennedy set that little gem in the ring of the Health Maintenance Organization Act of 1973).

“Privatization” is one of those Humpty Dumpty words that means just what the political class chooses it to mean, neither more nor less. And what they choose it to mean — whether we’re talking about “privately operated” prisons or “privately administered” Medicaid or any of the other schemes sold under the label — is that the state’s primary function is to corner, capture and cage customers for its corporate cronies (and, using regulation, to crush prospective competitors).

Real privatization would require government to actually get entirely out of the enterprises in question so that buyers and sellers approach each other on an equal, rather than politically gamed, footing. It’s been more than a century since anything resembling such a situation has prevailed in American health care.

3 comments

See my blog at "www.muskegonlibertarian.wordpress.com" for a deeper discussion of these issues. The major reason US health care costs so much is because of government enforced monopoly that denies people the right to take care of their own health, have access to those medical drugs that they need to treat the conditions they have. The beginnings of this started back in 1846 with the founding of the American Medical Association, whose objective was to increase the incomes of physicians through organization. There is nothing wrong with organizing to improve your life, all of us do it in one form or another. But when you start using the force of government to get your way, that is something else entirely! And this is what the professions have done, much to their own economic benefit, but by using the force of government to extract from the rest of us a higher income than what they could obtain if they were forced to operate in a true free market. One where the government would not provide them with the legal monopoly that they now enjoy over access to medical drugs.

Medicaid does a better job controlling costs!What ? This guy must be smoking the plants growing on peoples' window sills The fed and state attempt to control prices gets pasted on to other people who are paying for their health care.The dnc's head economic shill krugman is right the republican plan is just slightly less crappy version of state run health care,but the bureaucratic mess we have now isn't ideal either